AT&T, Wells Fargo, Caterpillar Financial price issues, tone takes slightly negative turn as

By Andrea Heisinger and Paul Deckelman

Omaha, Dec. 3 - AT&T Inc., Wells Fargo & Co. and Caterpillar Financial Services Corp. priced issues to start off the week, despite a slight downturn in tone.

"The overall tone is slightly on the negative side," one market source said.

"There were some negative headlines overnight, but it was stable enough for some deals to price."

In the secondary market, the firming trend seen at the tail end of last week evaporated, even though advancing issues continued to lead decliners by about a seven-to-five ratio. Traders saw key names, including new Wells Fargo, Wachovia and General Electric deals wider.

Credit-default swap spreads on debt linked to major banks and brokerages were also seen wider on the day

AT&T brings $3 billion

AT&T priced $3 billion of global notes in two tranches via Goldman Sachs, J.P. Morgan and Wachovia Securities.

The $1 billion tranche of 4.95% five-year notes priced at 99.916 with a spread of Treasuries plus 170 basis points. This was about equal with price talk that was in the 170 bps area.

The $2 billion tranche of 6.3% 30-year notes priced at 99.559 with a spread of Treasuries plus 200 bps. This was at the tight end of price talk that was 200 to 205 bps.

This issue carried a 25 to 30 bps new issue premium, a source close to the deal said. That was about where others were sitting Monday, they said.

Some issuers have been paying 40 to 50 bps in premiums in the last couple of weeks to get into the market, sources have said.

Wells Fargo adds $3 billion

Wells Fargo also priced $3 billion, theirs in 5.625% 10-year notes priced at 99.584 to yield 5.68% at a spread of Treasuries plus 183 bps.

Bookrunners were Citigroup, J.P. Morgan, Lehman Brothers and UBS Investment Bank.

Caterpillar upsized its issue from $350 million to $500 million in 4.85% five-year medium-term notes priced at 99.947 to yield 4.862% at a spread of Treasuries plus 155 bps.

Barclays and J.P. Morgan ran the books.

Calendar building

In addition to the issues that priced, several were announced.

Protective Life Corp. announced it will issue $150 million in 10-year senior notes maturing Jan. 15, 2018, via Merrill Lynch and Lehman Brothers.

It will likely price Tuesday, an informed source said.

Cintas Corp No. 2, the operating subsidiary of Cintas Corp., announced it will price an issue of senior notes via KeyBanc Capital Markets and J.P. Morgan.

Susquehana Capital I launched a split-rated issue of $100 million, or 4 million, capital securities priced at par of $25, via Wachovia and Morgan Stanley.

It is expected to price Tuesday, an informed source said.

Transocean Inc. will issue $2.5 billion of senior notes in three tranches later this week, an informed source said.

The tranches will be for five, 10 and 30-year notes.

The company also plans to issue $6 billion in senior convertible notes.

Bookrunners are Goldman Sachs and Lehman Brothers, with Citigroup acting as a bookrunner on the five-year tranche and J.P. Morgan on the ten and 30-year tranches.

Monday was much the same story as recent weeks, with issuers waiting to see what market conditions were like in the morning before deciding whether to go or not, a source said.

"There have been three weeks of extreme volatility and we still have that new issue backlog," he said.

Volatility eased last week, leading to an unloading of a small portion of the backlog in the middle of the week. There is much more to come out, sources have said, even though last week ended with a new issue total of more than $32 billion.

"I think what we'll have coming out this week will be representative across all sectors and maturities," a source said.

"It's definitely not all boxed into one type."

Wells Fargo wider in trading

A trader saw the new Wells Fargo 5 5/8% 10-year bonds trading at 185 bps bid, 181 bps offered over Treasuries, widening out a little on the bid side from their 183 bps spread at the pricing.

He saw the Wachovia 6.6% bonds due 2037 that priced last week as having widened to 230 bps bid, 225 bps offered from their 220 bps over pricing spread.

The new General Electric 5¼% notes due 2017 started the day in a 122 bps bid, 118 bps offered context, but by the day's end had widened out to 125 bps bid, 123 bps offered, although they remain well inside the 140 bps over level at which they had priced on Thursday.

He did not seen the new Goldman Sachs 6¾% 30-year bonds which priced Friday as a reopener to the existing tranche trading around in the aftermarket.

All told, he said, "things got weaker as the day progressed," opining that the market may have taken its cues from equities, which declined on investor fears that the U.S. economy's expansion will erode amid the ongoing troubles in the mortgage industry.

Bank, broker CDS weak

A trader meantime saw CDS on the debt of major banks and brokerages widening from Friday's levels.

Among the brokerages, he saw Bear Stearns' CDS cost at 180 bps bid, 187 bps offered, 3 bps wider than Friday, while Lehman Brothers and Merrill Lynch were each 10 bps wider, at 137 bps bid, 144 bps offered and 147 bps bid, 154 bps offered, respectively. Morgan Stanley's CDS costs were 3 bps wider at 95 bps bid, 102 bps offered.

Among the banks most major names were 2 bps to 5 bps wider on the session, with Bank of America at 56 bps bid, 61 bps offered, near JP Morgan at 56 bps bid, 60 bps offered. Citigroup stood at 73 bps bid, 78 bps offered, while Wells Fargo at 85 bps bid, 90 bps offered and Wachovia at 88 bps bid, 93 bps offered occupied similar levels.

Washington Mutual's debt-protection cost jumped by 25 bps to 340 bps bid, 360 bps offered.

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